Thursday, March 31, 2011

As you might imagine, this is exciting news for us. We launched Smashwords three years ago, and now this happens. We are blessed.

In the last 18 months, Smashwords has developed successful ebook distribution relationships with the Apple iBookstore, Barnes & Noble, Sony, Kobo and the Diesel eBookstore. Noticeably absent from the list is Amazon, the world's largest ebook retailer. Problem solved.

The combined company is named Smashazon.

I can hear the naysayers already. Sure, $69 billion is a lot of pay for distribution, but we think it's money well-spent, especially when it's someone else's money. We purchased Amazon with one of those no-money-down deals sponsored by the US Treasury Department. Full details are below in our our official press release.

Other naysayers probably think this is some cruel April Fool's prank. Can we help it that April 1 landed on April 1? Read on and decide for yourself.

FOR IMMEDIATE RELEASE

Smashwords Acquires Amazon in World’s Largest Leveraged Buyout

(Los Mirages, Calif. and Seattle WA) – April 1, 20111 – Smashwords, a leading ebook distributor, today announced a definitive agreement to acquire Amazon for $149.99 a share or $69 billion, a 20% discount off of yesterday’s closing list price.

The merger will create the world’s largest ebook publishing and distribution platform serving billions of authors, publishers and consumers worldwide.

The combined company, to be renamed Smashazon, will undergo a strategic product line rationalization.

Although Amazon has achieved minor success in the ebook market, the Smashwords management team believes it can lead Amazon to greater success by eliminating its distracting non-book operations.

“Amazon’s doing bang-up business in edible undergarments,” said Mark Coker, founder and CEO of the company formerly known as Smashwords. “Although we appreciate their focus on customer satisfaction, these products don’t fit with our palate or long term vision. We’d rather please the customer with words. The words of great stories light up our imaginations to create sights, sounds, smells and experiences more vivid than reality.“

The Smashwords management team is optimistic the former Amazon can leverage some of their non-book experience to sell more ebooks.

“Ebooks could taste and smell better,” said Jeffrey Bezos, former Amazon CEO who will assume the new position of Chief Satisfaction Officer at Smashazon. “We will fully service the needs of our customers.”

Following the acquisition, Smashazon will operate as a private company. The combined companies’ physical operations will be consolidated into the current Smashwords Smashoplex campus in Los Mirages, California.

Financing for the leveraged buyout was arranged by Smashwords Bank, N.A., a newly formed FDIC-insured banking institution that has secured a $69 billion credit line facility. The massive credit line, which makes this the largest-ever leveraged buyout in world history, was enabled by a new US Federal Reserve zero –interest– rate economic stimulus program called “Regulated Overnight Treasury Facilitation Loan Maturity Acquisition Obligations,“ better known as ROTFLMAO.

At a press conference to announce the acquisition, Coker said he expects the new Smashazon will pay off the US taxpayer-funded loan within five years, based on his projection that ebooks will grow from 10 percent of the overall book market today to over 450 percent of the market within three to five years.

“Amazon generated over $3 billion dollars in cash flow in 2010, and Smashwords generated nearly that much,” added Coker with an air of understated modesty that led some market observers to infer Smashwords’ cash flow might actually exceed Amazon’s.

“This acquisition proves that Smashwords is bigger than Amazon, otherwise the acquisition wouldn’t have been possible,” said one publishing industry consultant in attendance who requested anonymity.

When a reporter challenged Coker about the mathematical impossibility of any market growing to 450% of its future size, Coker responded, “We were wrong to underestimate the growth of ebooks to date, so the laws of probability therefore indicate an underestimation of the probable potential of ebooks in the future, no matter how improbable. The market will grow faster than any of us expect, which means my projections understate the true potential of the ebook market.”

Smashwords, which was founded a mere three years ago, now publishes and distributes over 41,000 ebooks from 16,000 authors and publishers around the world. The company’s catalog, which added 5,400 books in the last 30 days, is on track to surpass over 75,000 ebooks by the end of 2011.

Smashwords distributes ebooks to most of the major ebook stores, including the Apple iBookstore, Barnes & Noble, Sony, Kobo and the Diesel eBook store. Noticeably absent from this list is Amazon, a problem now remedied by the acquisition.

“We’re thrilled our ebooks can now flow to our new Smashazon KindleWords store,” said Coker.

One Smashwords insider, who asked not to be identified, commented, “We reached profitability last year, but billions in profits? I want a raise! Our office is only 1,200 square feet, so where are all those thousands of Amazonian employees going to fit? And we’re based in Los Gatos, not Los Mirages. This smells of an April Fools prank to me.”

About SmashazonCreated by the fictional merger of Smashwords and Amazon on April 1, 20111, Smashazon, Inc. will again become known as Smashwords starting April 2, 2011. Founded in 2008, privately held Smashwords operates the world’s leading ebook publishing and distribution platform serving authors, publishers, readers and retailers. Smashwords makes it free, fast and easy for the world’s authors and publishers to publish and distribute multi-format ebooks. Smashwords puts authors and publishers in full control over the pricing, sampling and marketing of their works. Authors and publishers receive 85 percent of the net proceeds from sales of their works. Smashwords has distribution relationships with leading online retailers such as Apple, Barnes & Noble, Sony, Kobo and the Diesel eBook Store, and also distributes to the leading mobile e-reading apps including Aldiko and Stanza. Smashwords is based in Los Gatos, California, and can be reached on the web at http://www.smashwords.com/. Visit the official Smashwords blog at http://blog.smashwords.com/.

Tuesday, March 29, 2011

Have you ever wondered where the most voracious ebook readers live? Probably not.

It's a fun question, though, and for the first time ever I present the data to you.

I set out to determine which states ebook buyers live in, and then I wanted to know how the states stack up against one another.

The numbers are surprising, especially when you look at per capita consumption.

Here's how I pulled together the numbers below. Smashwords distributes over 20,000 ebooks to Barnes & Noble. They report to us a breakdown of sales by state. I summed up all Smashwords sales, broken down by state, from Barnes & Noble for the three month period of December, 2010 through February, 2011. Next, I divided each state's sales by the sum of the total to determine the percentage of all ebooks sales from each state. Then I added US population data from the latest US census. Next, I determined what percent of the US population lives in each state. Finally, to determine the how states rank against each other on ebook sales, I normalized the data on a per capita basis. I did this by dividing each state's percentage of overall sales they represent by the percentage of the US population they represent. Dizzy yet? This gave me the final, coolest numbers of them all, a normalized measure of per capita ebook consumption for each state.

So here's the first set of data, where I look at which states generate the highest (and lowest) overall sales. Obviously, the states with the largest populations are likely to purchase the most ebooks.

Now here's where it gets really interesting. Let's look at per capita consumption. Take a look at the Ebook Per Capita Sales Ratio column. This is how each state stacks up against the others, adjusted for population. Alaska, which ranks #47 in terms of overall population, ranks #1 for per capita ebook purchases measured by dollar volume. With a score of 2.92, this means they purchase 292% of the per capita than the average state, or almost triple the national average. A score of 100% means average, 200% means double the average, etc. So as you see, Alaska, North Dakota and Utah round out the top three, and Mississippi, California and the District of Columbia round out the bottom three. My home state of California, really?

A good statistician (and I don't claim to be one - I earned a D+ in statistics at UC Berkeley, and after retaking the class I earned a B-, nothing to brag about so I won't), I should poke some holes in my data. This data only looks at sales through Barnes & Noble. It doesn't take into account the geographic distribution of B&N's physical stores (this might impact where they've sold nooks, which would then impact customer counts). It doesn't take into consideration B&N's market share in each state. It doesn't take into consideration the age, sex, per capita income levels or language breakdowns of each state's population, or the penetration of broadband or dial-up access. I don't disclose the total number of books represented by these three months of sales, or the aggregate sales value, or the average price per book, or the category of book sold. We're a private company, so we don't disclose these numbers (though I can tell you it's a statistically significant number).

I published my raw data online over at the Smashwords Slideshare channel. I invite the true statisticians among you to download my numbers as a starting point for further number crunching. For example, the US Census Data page, where I gathered the population data, has other interesting data sets you can throw against my data, such as median household income, age of population (under 18, over 65), college education, home ownership rates, etc., so I encourage others to mine the data for more meaning. All I ask is that you reference Smashwords as the source of the data and link back to the blog (oh, and please encourage your favorite authors to publish and distribute with Smashwords! Okay, that's optional). Also email me links to your analysis and I'll link to it below so others can enjoy your findings.

Sunday, March 27, 2011

Smashwords authors and publishers have released over 5,000 new titles in the last 30 days.

To put this in perspective, we published 140 titles in all of 2008. In 2009, our catalog grew to 6,000, and at the end of 2010 (only three months ago), our title count stood at 28,500. We're on track to meet or beat my goal of 75,000 titles by the end of 2011.

1.7 billion words are now published at Smashwords.

We're witnessing the unfettered liberation of the collective creative efforts of over 16,000 Smashwords authors and small publishers from around the globe.

We put the printing press in the sky and made it freely available and accessible to all. Indie authors and small presses are using Smashwords to publish and distribute direct to readers.

Readers are the new curators. Reader word-of-mouth, catalyzed by social media, drive book discovery and sales.

Critics of self-publishing will say that many of these books are drek and not ready for prime time. Certainly, this is true of some of these books. We make it almost too easy to become a published author, but we don't make it easy to become a great author. That's the author's responsibility.

Some authors, despite our best advice, cut corners and upload books that haven't been thoroughly edited, revised and proofed. Others upload books with poor-quality ebook covers. Readers have little patience for such shoddy, unprofessional work. These titles either earn scathing reviews or receive the worst punishment any book can face: they're ignored by readers.

Despite the inevitable drek, the upside of an open printing press is that we allow books to get out there that would never be published by a traditional publisher. Quality books. Books from authors who made the effort to honor their reader with a great read. This advantage of the open printing press, in my opinion, far outweighs any downside.

Traditional publishers are in the business of publishing books that sell. As I mentioned here previously, they judge books through a backward-looking commercial filter. They acquire today what was selling yesterday so they can publish more of the same 12 months from now.

Often, commercial appeal and quality intersect, but not always. Books with small target markets, or authors without established platforms, or authors who are ahead of their time are of little interest to Big Publishers. These commercial publishers also have difficulty predicting which books will have commercial appeal. They make their best guess but ultimately it's the readers who decide.

Does size matter? Yes. Hidden in these numbers are works of genius and yes, here and there, tomorrow's best sellers.

While few would disagree that authors deserve compensation for their hard work, the problem with DRM is that it treats law-abiding customers like criminals. DRM controls how, where and when a reader reads books.

Oh, and then there's the small matter that DRM doesn't work.

Five Reasons to Say No to DRM:

Readers (who know about DRM) don't like DRM

DRM adds expense to books

DRM makes books complex

DRM limits accessibility to books, especially for those with vision disabilities who require Text-to-Speech (TTS)

DRM doesn't prevent piracy

At Smashwords, we've always been DRM-free. I've written about my views here on the blog, at HuffPo, and elsewhere.

The biggest threat facing authors and publishers today is not piracy, it's obscurity. Anything that makes a book less accessible and less enjoyable makes it more obscure.

Piracy is an indication your content is in demand, yet it's also an indication your content is not available, accessible or affordable to those who want it. Pirates satisfy demand not satisfied by the publisher.

The best method of combat piracy is to make purchasing preferable to pirating.

How do you do this? First, distribute your book to as many retailers as possible. If your book is available where customers want to shop, it's easier for a reader to buy it than to look for an illegal copy. Second, price your book fairly. If the book is affordable to your customers, they have less incentive to steal it. Third, make your book available in multiple formats so it can be read on any e-reading device. Fourth, trust your customer by going DRM-free, and communicate to them that you trust them. Rather than threatening the customer with legal action, gently remind them of their ethical obligation to support the hard work of the author (This is the thinking behind the Smashwords License Statement).

At the risk of beating a dead horse (literally and figuratively), if a publisher were to do the opposite of my above four recommendations, then what you'd have are the practices of the big 6 traditional book publishers.

Isn't it ironic that the DRM they require for their books is in reaction to a fear of a practice (piracy) encouraged by their own customer-unfriendly business policies? I'm referring to their practice of scarcity-as-a-business-model, high ebook prices, limited worldwide distribution, limited formats and unwillingness to trust the customer. For more horse-beating, see my last post, The Author Uprising against Big Publishing.

There will always be scoundrels and cheapskates who will never pay for anything. Those people would never be your customer anyway so they don't represent a lost sale. And who knows, they might even love your book so much they rave about it to their more ethically-inclined friends.

Some best-selling authors such as Paulo Coelho are known to have deliberately encouraged piracy of their books. Kevin Kelly, last year at the Writing for Change Conference in November, told the crowd he views piracy as a tax on success, a tax he said he's happy to pay.

A couple years ago, I remember one prospective Smashwords author wrote me and said, "Do you think I'm an idiot? There's no way I'm going to publish DRM-free at Smashwords. Within days there will be millions of stolen copies across the Internet!" I shared this story later in a talk I gave at the IBPA's Publishing University conference in New York, and afterward one author walked up to me and said, "Are you kidding? I'd pay to have my book stolen a million times!"

There's also a growing body of evidence that piracy doesn't harm sales. Might piracy even improve sales? This is the conclusion author Neil Gaiman came to, as he explains in this must-watch video below.

Several major ebook retailers, including Apple, Barnes & Noble and Amazon, have already dropped DRM as a requirement in their ebook stores. Authors and publishers now have more freedom to publish DRM-free.

Some readers are rebelling against DRM. Check out Lost Book Sales. It's a fun site sponsored by Jane Litte of Dear Author in which readers list books they would have purchased but didn't because the books were DRM-infected.

Are you a reader? How do you feel about DRM?

My thanks to author and blogger Karl Drinkwater, whose interesting blog post, DRM Will Kill us All is where I first discovered Nina's images.

Thursday, March 3, 2011

In the dark alleyways of publishing, an author uprising is brewing against Big Publishing.

I’ve been thinking a lot about revolution lately thanks to the events unfolding in North Africa.

My wife, Lesleyann, has friends in Egypt, and they’ve kept us up to date via email. Their dispatches alternate between fear, uncertainty, optimism and celebration.

Revolutions are an awkward and messy business. They represent the end of one paradigm and the beginning of the next. While the root causes can trace back decades, when the uprising arrives it can occur with alarming rapidity.

The events in North Africa have recalibrated the meaning of "revolution" for me. I’m thinking now about revolution in the context of a popular uprising.

At the heart of any revolution is a loss of faith in the prevailing regime. In Egypt’s case, a number of catalysts precipitated the revolution; chief among them an oppressive political environment that offered little opportunity for democratic participation, freedom of speech and economic opportunity.

Frederick Nietzsche wrote, “God is dead.” I recall my philosophy professor at U.C. Berkeley 25 years ago explaining the quote with great passion. He said the beauty of the quote went beyond its immediate religious connotation – it was a metaphor for the power of faith. When you believe in something, your faith powers that in which you believe.

If we lose faith in an institution, a regime or a belief system, the very survival of that institution is imperiled.

Every institution is powered by faith. If your house catches on fire, you have faith the local fire department will respond. If you purchase a tomato from your local farmer’s market, you have faith the item you purchased will indeed taste like a tomato.

Often, faith is based on some future expected result. You can’t touch, smell or see it in the present. If we are rewarded for our faith, such as trusting that fire truck to come when we expect it, then our faith in that institution is reinforced.

Faith is the single most important force-of-nature driving all human experience.

Faith, religion, revolution, and publishing. Trust me, I’m going somewhere with this. The embedded PowerPoint below represents my attempt to pull it all together and make sense of where the publishing world is headed.

In the presentation, I draw parallels between the catalysts for the Egyptian revolution and the author uprising I foresee taking root in publishing.

If authors – the beating heart powering Big Publishing – lose faith in Big Publishing, then big publishing as we know it will die. By “Big Publishing,” I’m referring to the old, pre-self-publishing system embodied by the Big 6 New York publishers, in which the publisher serves as the author’s judge, jury, gatekeeper and executioner.

If Big Publishing approves of your book, they acquire it. Post-acquisition, an author can die happy knowing they’re a published author with all the esteem, respect and future possibilities embodied in this blessing. At least, that's what most authors are trained to believe.

Unfortunately, it’s tough to find a traditionally published author who waxes eloquent about their post-publication experience. It’s like the author goes to heaven and reports back via John Edward (the guy who talks to dead people) that they discovered famine on the other side of the pearly gates.

Big Publishing, although it employs thousands of talented and well-intentioned professionals, is built upon a broken business model.

The cracks are growing more apparent, and before long, authors – both traditionally published and otherwise – will lose faith in the institution. When that happens, the seeds of revolution are sewn. Some might argue we’re already there.

Ask Not What your Publisher Can Do for You

Two questions and their answers will drive the author uprising against Big Publishing:

What can a publisher do for me that I (the author) cannot do for myself?

Might a big publisher actually harm my prospects as an author?

Ten years ago, the answers to these simple questions validated the need for Big Publishing. Why? In the old print world, Big Publishing controlled access to readers. They controlled the printing press and the access to retail distribution.

Yet these same questions asked today yield mixed results. In the last four or five months, Joe Konrath started urging readers of his blog to abandon Big Publishing (he calls it “Legacy Publishing”). He contends indie authors can produce, publish, price and promote a book more effectively than Big Publishing.

Amanda Hocking, in her recent interview with USA Today, was quoted as saying, "I can't really say that I would have been more successful if I'd gone with a traditional publisher."

No doubt, much of Hocking’s success is because she’s an indie author. She writes great books her readers love. She prices her series-starters at only $.99 and the rest at $2.99. Great books + low prices + enthusiastic fans + an author directly engaged with her fans = viral readership. Few big publishers are prepared to play by these new rules.

Every week we hear of self-published authors who were previously rejected by Big Publishing finding success with self-published ebooks. My presentation lists 50 Indie Ebook Authors to Watch. Brian Pratt, profiled here in December, is one such author. Ruth Ann Nordin is another. Nordin's An Inconvenient Marriage is the #2 best-selling romance title today in the Apple iBookstore’s romance category, and #35 among all paid titles at Apple.

Two or three years from now when ebooks account for more than 50% of the book market, the same two dangerous questions above will yield a more unequivocal answer in favor of self-publishing.

All the major ebook retailers – Apple, Barnes & Noble, Sony, Kobo and Amazon – have embraced indie ebook authors and grant them equal shelf presence alongside Big Publishing authors. Smashwords is now distributing over 20,000 titles to most of these retailers (we're not at Amazon yet). Readers, not publishers, decide what sells.

Do authors still need publishers in this new world order? I think it all goes back to my first question. To survive and thrive, publishers big and small must do for authors what authors cannot or will not do for themselves.